Justice, consumers and gender equality

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EU Company Law package

Overall state of play:

• Commission proposals: Adopted on 25.04.2018: COM (2018) 239 and COM (2018)241
• Directive (EU) 2019/1151 as regards the use of digital tools and processes in company law adopted on 20 June 2019.
• Directive (EU) 2019/2121 regarding cross-border conversions, mergers and divisions adopted on 27 November 2019.

State of play, main conclusions, outlook

The objective of the Commission proposals was to address the shortcomings that companies encountered in using digital tools in their interactions with public authorities and when carrying out cross-border operations, such as divisions or conversions. In both cases, there was no appropriate EU legal framework and national rules either did not exist or were very divergent. This hampered the use of digital tools throughout the company's lifecycle, especially in the cross-border context, and led to legal uncertainty and cost for companies which wanted to carry out cross-border operations, and to legal uncertainty for the stakeholders involved (employees, creditors, minority shareholders). In addition, an evaluation of the EU rules on cross-border mergers showed that they contained inefficiencies and loopholes that needed to be addressed.

The Commission adopted two legislative proposals in 2018. They were adopted in November 2019: Directive (EU) 2019/1151 as regards the use of digital tools and processes in company law and Directive (EU) 2019/2121 as regards cross-border conversions, mergers and divisions. These directives will enable companies to use digital tools in company law procedures and restructure and move cross-border, while providing strong safeguards against fraud and protection of stakeholders.

In particular, Directive (EU) 2019/1151 enables entrepreneurs to set up new business or branches and update information available in business registers fully online. At the same time, it sets out strong security standards allowing to require physical presence in exceptional cases. It also makes more company data available free of charge from business registers and establishes an exchange of information between Member States on disqualified directors, which both will contribute to a more transparent business environment.

Directive (EU) 2019/2121 provides clear harmonised procedural rules for cross-border conversions and divisions, and streamlines rules for cross-border mergers, including proportionate safeguards to protect the rights of minority shareholders and creditors in all three operations. It introduces strong and mandatory anti-abuse measures to ensure that no operations are authorised if they are carried out for abusive, fraudulent or criminal purposes. The Directive also sets out provisions to ensure that in case of all three operations, employees’ participation rights are preserved and employees are well informed and consulted during the operations.

Estimated savings and benefits

Concerning the use of digital tools, the new rules are expected to save companies time and money when they set up a new company or branch or update information available in business registers as online procedures will be available in all Member States and companies will be able to use them not only at national level, but also cross-border.

As to the cross-border operations, the clear procedural rules for cross-border conversions and divisions and amended ones for cross-border mergers will help companies to cut costs and save time and will enable companies to move and reorganise in the EU single market while providing necessary safeguards for stakeholders concerned, and against abuse.

REFIT Platform

In its opinion XIII.9a, the REFIT Platform recommended that the company act should be technology neutral. It considered that the Company Law should simplify the company acts regarding, for example, third party services and that legal means should be foreseen to allow people to use electronic tools of communication in their exchanges with public authorities. For this purpose, a number of recommendations regarding digitalisation of company law and corporate governance were proposed. The Commission considered this opinion in the Company Law Package; consequently, the new rules will facilitate the use of digital technologies throughout a company’s lifecycle, in particular in relationto the online registration procedures and to the electronic filing of company documents and information in business registers.

State of Play:

Adopted; COM (2018) 239 and COM (2018)241, 25.04.2018

Which objective(s) did the Commission pursue?

The 2018 company law package consisted of two legislative proposals that included the following elements:

- Digitalisation of a company's life cycle: on-line registration of companies and branches, online filing and publication of company information;

- Cross-border operations of companies: a balanced EU harmonised legal framework for cross-border divisions, cross-border conversions and streamlined rules for cross-border mergers, which includes provisions to protect the interests of stakeholders such as employees, creditors and minority shareholders.

Estimated savings and benefits

Concerning the use of digital tools, it was estimated in the impact assessment that in particular fully online registration, with more than 2 million new companies registering in the EU each year, would have a significant economic impact in both cross-border and domestic registrations. This was based on the estimations that online registration could take on average half of the time needed to process a paper-based registration and the cost for online registration could be up to 3 times cheaper than the paper-based registration¹.

As to the cross-border operations, given that the introduction of the harmonised rules for cross-border mergers lead to 173% increase in cross-border mergers from 2008 to 2012, the impact assessment estimated that further streamlining of the rules would increase cross-border mergers by making them more accessible to a broader population of companies. Thereby, opening up a bottleneck in economic activity across the EU. Similarly, the impact assessment estimated that an introduction of harmonised rules for cross-border divisions and conversions could lead to corresponding increase in these operations².

¹ Based on a World Bank report. The numbers apply on average percentage of income per capita. Impact Assessment, SWD(2018) 141 final, p. 45.

² Impact Assessment, SWD(2018) 141 final, p. 87.

State of Play:

• Adopted; Directive (EU) 2019/1151 and Directive (EU) 2019/2121

Outcome of Legislative Procedure

Directive (EU) 2019/1151 as regards the use of digital tools and processes in company law was adopted by the Council of the EU on 20 June 2019 and published on 11 July 2019 (OJEU L 186/80).

Directive (EU) 2019/2121 as regards cross-border conversions, mergers and divisions was adopted by the Council of the EU on 27 November 2019 and published on 12 December 2019 (OJEU L 321/1).

Following the conclusion of negotiations between the co-legislators, the main principles and most of the concrete elements of both Commission proposals were maintained. The new rules on cross-border operations, by aligning the rules across the three operations, will lead to simplification and legal certainty, as companies will be able to use similar rules when carrying out conversions, mergers or divisions, including as regards the anti-abuse check by authorities and safeguards to protect employees, minority shareholders and creditors.

State of Play:

Directive (EU) 2019/1151
• Transposition Deadline: 1 August 2021. However, 17 Member States, i.e. Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Hungary, Luxembourg, Netherlands, Poland, Romania, Slovenia, Slovakia, Sweden, availed of the possibility provided by the Directive to have an extension of the transposition period by one year, i.e. by August 2022. In 2021 and 2022, the Commission initiated infringement procedures due to the absence of communication by some Member States of measures taken to transpose this Directive into national law (“non-communication infringements).
In addition, for some specific provisions in Article 2(2) the transposition deadline is 1 August 2023.
• Reporting by the Commission and review (Article 2): The Commission shall, no later than 1 August 2025, carry out an evaluation and present a report on the findings to the European Parliament, to the Council and to the European Economic and Social Committee. In addition, the evaluation and report for provisions in Article 2(2) shall be carried out no later than 1 August 2026.
• Commission Implementing Regulation (EU) 2020/2244 (based on Article 1 amending Article 24 of Directive (EU) 2017/1132) was published in the Official Journal of the EU in December 2020 (OJ L 439, 29.12.2020, p. 1–22).

Directive (EU) 2019/2121
• Transposition Deadline: 31 January 2023
• Reporting by the Commission and review (Article 4): The Commission shall, no later than 1 February 2027, carry out an evaluation of this Directive by 1 February 2027 and shall present a report to the European Parliament, the Council and the European Economic and Social Committee on the findings of that evaluation.
• Commission Implementing Regulation (EU) 2021/1042 (based on Article 1 amending Article 24 of Directive (EU) 2017/1132) was published in the Official Journal of the EU in June 2021 (OJ L 225, 25.6.2021, p. 7–51).

Implementation by Member States

The Commission organised a number of transposition workshops with Member States on both Directive (EU) 2019/1151 and Directive (EU) 2019/2121 between November 2019 and November 2022.